Gold Price Forecast: XAU/USD extends slide amid persistent US Dollar strength

Valeria Bednarik FXStreet

XAU/USD Current price: 2,014.25

The United States' Gross Domestic Product beat the market expectations in Q4.
The European Central Bank left rates unchanged, surprised with a dovish stance.
XAU/USD remains on the losing side, risk of a slide below $2,000 increased.

Gold remains confined within familiar levels on Thursday despite resurgent US Dollar demand following first-tier news. The United States (US) reported that the economy grew at an annualized pace of 3.3% in the three months to December, according to the Bureau of Economic Analysis (BEA) Gross Domestic Product (GDP) preliminary estimate. The figure was much better than the 2% anticipated by market players, boosting the market's optimism. As a result, stocks surged, while government bond yields remained subdued.

The US also published December Durable Goods Orders, which were unchanged in December, and Initial Jobless Claims for the week ended January 19, up to 214K vs the 200 K expected.

Additionally, the European Central Bank (ECB) announced its monetary policy decision, leaving the three key interest rates unchanged, as widely anticipated. President Christine Lagarde surprised investors with a dovish message which weighed on the Euro and further boosted demand for the USD. Lagarde made no efforts to cool down expectations for a rate cut, just saying it was premature to discuss the matter. Furthermore, she noted that almost all underlying inflation measures fell in December and expects it to ease further over the year.

By the end of the events, market players lifted the odds for soon-to-come rate cuts at both shores of the Atlantic. Still, one more big event is ahead: the United States will publish the December core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's (Fed) favourite inflation gauge, on Friday. The figure is expected to be 3% YoY, easing from 3.2% in the previous month, while the monthly gain is foreseen at 0.2%, slightly above the November one. Better than anticipated readings could further boost speculation of a Federal Reserve rate cut in March and send the Greenback higher ahead of the weekend.

XAU/USD short-term technical outlook

The daily chart for XAU/USD shows that the risk remains skewed to the downside. A bearish 20 Simple Moving Average (SMA) maintains its bearish slope above the current level, while the longer moving averages remain directionless, far below the current level. Technical indicators, in the meantime, hold directionless within negative levels.

According to near-term technical readings, XAU/USD is poised to extend its decline. The 4-hour chart shows the pair met intraday sellers around a mildly bearish 20 SMA while the longer ones grind lower above it. Technical indicators, in the meantime, accelerate lower within negative levels, supporting another leg south on a break below the $2,010 price zone.

Support levels: 2,010.00 2,001.60 1,988.60

Resistance levels: 2,021.80 2,033.10 2,040.30

View Live Chart for XAU/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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